Arbitration Bill [HL]

Lord Hoffmann Excerpts

Committee stage
Wednesday 11th September 2024 Lords Chamber

[Lord Hacking (Lab)]

My Lords, I will pause for a moment to allow Members of the House to leave, so that only those taking part in this Committee remain. I look to my right with some caution, because when I stood in support of my Amendment 1, I was unaware of a bank of noble and learned Lords on my right-hand side—there were three of them. Now there is only one: the noble and learned Lord, Lord Hoffman, who is sitting in his place. He told me over tea that the reason he is remaining is to oppose my next amendment. He opposed my Amendment 1 with some fierceness, and now he is staying back to oppose my next amendment.

This amendment goes back 28 years to the passage of the Arbitration Bill in 1996. I then objected to the introduction of the principle of “costs following the event”, which was in general usage in the English courts when the successful party was seeking costs against an unsuccessful party or parties. It was generally thought then that the event meant the winner won the costs, but Mr Justice Bingham—later Lord Bingham, Lord Chief Justice and then a senior Law Lord—said that was not right. It was in a case called Re: Catherine that Mr Justice Bingham said we should look at which party was responsible for what costs, and that the costs order should accordingly be made. My argument was that this obscure phraseology went against the drafting of the whole Bill.

Noble Lords who remember those days and now look at the Bill may remember that there was much praise for Mark Saville, later the noble and learned Lord, Lord Saville, who was chairman of the DAC that drafted the Bill—assisted by the secretary of that committee, the young barrister Toby Landau, and the wonderful parliamentary draftsman Geoffrey Sellars. The joy of the 1996 Act is that you can read it, passage by passage, in its clear, logical way and its clear, logical language. What a contrast that is to so many Bills that come before us—the detail and complication of many clauses cause most of us to put cold towels around our heads before we have a chance of understanding what is meant. I am not sure what the phraseology was then, in 1996, of the rules of the Supreme Court or the county court—in other words, the White Book and the Green Book—but I know now what the rules are in the new CPR. In particular, CPR rule 44.2(2)(a) says that

“the unsuccessful party will … pay the costs of the successful party”.

That is in the clearest possible language, so why should we continue to inflict upon the international community these ancient words of “costs following the event” when they are not used anywhere else? Why do international parties have to seek out the meaning? I am not suggesting that my drafting is perfect—indeed, noble Lords who have been looking at the Marshalled List will note that I made a mistake and had to re-draft—but it can all be quite simply done without any delay. For example, my drafting could be put in front of the rules committee of the Supreme Court, which can be consulted, as can the Chartered Institute of Arbitrators, the London Court of International Arbitration, the ICC and so forth. There is no cause for delay. If the drafting of my amendment is thought to be worthy of improvement, I accept that, but can the Minister—and this is the second time I am asking him, almost imploring him after the response I got to my earlier amendment—keep an open mind and not leave this strange phraseology of “follow the event” in Section 61(2) of the Arbitration Act?

[Lord Hoffmann (CB)]

My Lords, I greatly regret that the noble Lord should have cast me as his personal nemesis, particularly since it is entirely desirable that an arbitration tribunal should have the power to do what he said Lord Bingham did in the case to which he referred; that is, to distinguish between the cost of issues on which people have been successful and those on which money has been spent and on which they have been unsuccessful. However, the tribunal has such a power already.

I am sure that my friend the noble Lord, Lord Hacking, would recognise that in the end the power to award costs is entirely a matter for the discretion of the tribunal. It can take into account whether it thinks the party has spent too much or whether it has succeeded on this or that issue. All these issues can be taken into account. What it says that is salutary—this is something which attracts persons to come to London and have arbitrations under English law—is that in the ordinary way, if you have not spent too much and not lost on some issues, if you have won the case you will get your costs. That is a very attractive thing to offer to people who are about to launch an arbitration.

We have in the 1996 Act a time-honoured formula which everybody knows. They know exactly how it works and I really see no advantage in substituting a new formula, when nobody quite knows now how it is going to work.

[Lord Wolfson of Tredegar (Con)]

My Lords, I hope that I can be relatively brief because this is a short point. As the noble and learned Lord, Lord Hoffmann, said, the costs of any arbitration are in the discretion of the tribunal. I would add only a slight gloss on that. As the noble and learned Lord knows, there is provision in the Act that if the parties have agreed the result or the provisions on costs, the tribunal has to respect that agreement, with one exception in the Act. Of course, that underlines a very important point: the whole arbitral process is consensual and contractual. We should therefore tread very lightly in this area generally, and especially when we are considering making changes to the terms of the Act.

With respect to the noble Lord, Lord Hacking, I have a certain amount of sympathy with his language point because we do not use “follow the event” anymore. That phrase is no longer used in the CPR, as he pointed out, but I took the opportunity this afternoon to have a look at the DAC report. At paragraph 268, it said in terms that the intention was to follow the normal rule in this jurisdiction—that the successful party should get the costs. That is one of the reasons why people choose to arbitrate in London and not somewhere else, and certainly not to litigate somewhere else where you can win and not get your costs back. I would be reluctant to do anything which would undermine London arbitration.

We could of course change the words to track CPR 44.2(2)(a), but I suggest that would be unnecessary and ill advised. I am not aware that there is any confusion in the international arbitration community as to what “follow the event” means. Arbitrators are perfectly able to make what are effectively issues-based awards of costs, or to reflect the fact that the claimant might have won on two issues but the defendant has won on another. Although I understand the noble Lord’s language point, I suggest that we should leave matters as they are.

As for the amount of costs or recoverable costs, which is the other point that the noble Lord, Lord Hacking, deals with in his amendment, Section 63(5) of the Act already provides that the tribunal can limit its award on costs to those costs which have been reasonably incurred. As someone whose fees are often challenged on the basis that they are unreasonable, that is a provision with which I am personally familiar. We appreciate the thrust of the amendment but, certainly on these Benches, we would suggest that it is not needed.